After a long career at Barron's, I joined Forbes as San Francisco bureau chief in December 2010. I've been writing about technology and investing for more than 25 years. With the Tech Trade, I've picked up where I left off when I was writing the Tech Trader Daily blog at Barrons.com. When I'm not working, you can find me riding my road bike around the Bay Area hills, managing my fantasy baseball team, rooting for my beloved Phillies and Eagles and hanging out in the Valley with my family. You can follow me on Facebook, on Twitter (@savitz), and on Google+.

Skullcandy Shrs Gets Kick In The Head From Morgan Stanley

Shares of headphone maker Skullcandy were clobbered Thursday after Morgan Stanley analyst Jay Sole cut his rating on the stock to Equal Weight from Overweight, with a new price target of $15, down from $21.

He also cut estimates on the company: For 2012, he goes to $1.12, from $1.16; for 2013, he now sees $1.40, down from $1.55.

“Channel checks challenge our prior thesis of rising prices and stable market share,” Sole writes in a research note. “Key SKUL product ASPs are falling unexpectedly and the Beats by Dr. Dre brand is taking more share than expected. We reduce EPS and now see only balanced risk/reward.”

Sole writes that he now sees greater impact from rivals and more risk in the stock.

He cites the following evidence:

A Target store visit finds the price of the company’s high volume Ink’d product down to $16.99, from $19.99.

Monster is taking further “peg” share. (Which is sort of like shelf space, except headphones tend to hang on pegs at retail.)

Radio Shack is offering 30% discounts on Skullcandy products.

Staples is swapping out the company’s high-end Aviator line with products from rival Soul Electronics.

Another negative: improved earbuds from Apple. At their launch event this week, Apple announced an improved line it calls EarPods.

The analyst adds that growth in the headphone market is coming from high price ranges where Skullcandy is weak. “Industry growth in SKUL’s $20-$50 earbud sweet spot may have slowed and we think SKUL’s upcoming higher priced offerings may not arrive as soon as hoped,” he writes.

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